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Political parties must be stripped of control over peerages to restore public trust in the wake of the cash-for-honours affair, an influential group of MPs said.

The membership of the House of Lords should be decided by an independent body in a fully transparent process, according to the Public Administration Committee. Parties should merely publish “long lists” of their preferred candidates – with explanations of why they deserve a seat in the Upper House.

The move is among a raft of reforms set out in the MPs’ final report into the alleged links between honours and financial support for parties, which dogged the last two years of Tony Blair’s premiership.

The report calls for the Electoral Commission to be given tougher enforcement powers to enforce high standards of probity. However, the committee rejects criticism – voiced by the Scotland Yard investigative team and others – that the watchdog contributed to the cash-for-honours controversy by failing to define what was meant by a “commercial” loan.

It also defends Assistant Commissioner John Yates, who led the probe, against claims that he should have dismissed the accusations of wrongdoing immediately.

Committee chairman Dr Tony Wright said: “Allegations were made that went to the heart of our political system. Those allegations deserved to be taken seriously. The fact that no charges were brought has not diminished the damage that has been done to trust in public life.”

The House of Lords Appointments Commission should be put on a statutory footing, and given control over the “size, balance and composition” of the chamber under criteria agreed by Parliament as a whole.

But the MPs insist that Prime Minister Gordon Brown could take steps to restore confidence straight away. “The Government could implement immediately our proposal for new peers to be chosen by the Appointments Commission rather than by political parties,” the report says.

“Under our proposals, the Commission would choose candidates from ‘long lists’ provided and published by the parties, with the qualifications of nominees made public.”

Dr Wright said the public needed “to be sure that the people who sit in the House of Lords sit there on merit”. “The fact is that people do not trust parties to appoint their own members to the Lords on merit, and do not believe there is no connection between donations that are made and peerages that are received. The final judgment of whether someone is suitable must be made by a body that is clearly independent of the Government and of political parties.”